Federal and state regulators slammed OptimumBank with a stronger enforcement action as the “undercapitalized” bank has been unable to satisfy a previous order for four years.

The Plantation-based bank, a subsidiary of OptimumBank Holdings (NASDAQ: OPHC), was given the amended consent order from the Federal Deposit Insurance Corp. and the Florida Office of Financial Regulation on Feb. 3, but has yet to announce it to shareholders in a public filing. The FDIC made the action public on Friday as part of its monthly enforcement news release.

The enforcement action stemmed from a regulatory exam conducted in January 2013. This replaces an enforcement action from April 2010.

The new order states that regulators found additional “unsafe or unsound banking practices or violations of law or regulations” related to weak asset quality, capital adequacy, earnings, management effectiveness, liquidity and sensitivity to market risk.

About a month after receiving the order, the $129 million-asset bank revised its 2014 results to show a deeper loss. It must raise its capital levels or find a merger partner if it wants to avoid facing even more serious regulatory action.

Regulators took a direct shot at the bank’s executive team as the order gave OptimumBank 120 days to “have and retain qualified management” with sufficient experience. It specifically named the importance of having a qualified CEO, senior lending officer and chief operating officer that can operate the bank in compliance with the law. OptimumBank was given 20 days to hire a bank consultant to assess the qualifications of its current management, including CEO Timothy L. Terry, who was hired in February 2013.

Regulators demanded that OptimumBank’s board of directors increase their participating in the affairs of the bank through well-documented monthly meetings that address its credit problems and management performance. The order singled out the importance of the board carefully reviewing and documenting requests for insider loans from the bank’s management and directors as well as the related conflicts of interest policy.

There was concern with the relationship between the bank and its holding company, as the order gave it 60 days to give regulators a policy governing those dealings. This policy must include limiting payment of management, consulting and other fees from the bank to the bank holding company to apply only to “necessary services actually performed.”

Regulators said at least three-fifths of its board members must be current residents of Florida and have lived in the state for at least a year.

OptimumBank had one board member resign in January. At least two of its current board members, including Chairman Moishe Gubin, reside outside of Florida. Regulators gave the bank 60 days to add two independent board members, meaning they aren’t employees or owners of more than 5 percent of its shares.

The order criticized OptimumBank for “weak administration practices” for underwriting new loans, monitoring existing loans and doing loan modifications. It gave the bank 60 days to fix these concerns, such as reviewing loan brokers, approval of refinancing that results in cash back to borrowers, reviewing property appraisers and obtaining current documentation on loans.

That new policy must restrict OptimumBank to lending out 25 percent of its Tier 1 capital to a single borrower. Given that the bank had just $5.4 million in Tier 1 capital on Dec. 31, that’s a tight set of handcuffs.

Regulators also restricted OptimumBank to no more than 10 percent asset growth per year.

The capital requirements for OptimumBank, a Tier 1 capital ratio of 8 percent and a total risk-based capital ratio of 12 percent, were not changed by this order. However, it gave the bank 90 days to comply with those ratios and 60 days to give regulators a written plan to achieve them. Should the bank not reach its capital goal, it must submit a contingency plan that includes the possible sale or merger of the bank.

The bank’s capital ratios on Dec. 31 were 4.21 and 6.56 percent, respectively.

Gubin hoped to add capital to OptimumBank in 2013 by increasing his stake in the bank, but he withdrew that proposal after regulators declined to approve it in a timely manner.

Regulators told OptimumBank to reduce its level of problem assets, diminish its over concentration in commercial real estate loans and immediately charge off assets that were classified as a loss. It must correct documentation deficiencies that regulators found in loans the bank called “special mention” – a category where a loan is still current but has been flagged for weakness. The bank can’t extend credit to borrowers with troubled loans without justifying it to regulators.

Regulators also gave OptimumBank 30 days to correct criticisms in the way it reserves for future loan losses that were found in the 2013 exam.

OptimumBank had $9.4 million in noncurrent loans, or 11.5 percent of total loans, and $7.6 million in repossessed property on Dec. 31. Its $2.8 million reserve for future loan losses covered 30 percent of its noncurrent loans.

"When I saw their 2013 financials, I had to double check they were for 2013 and not for 2010," Miami-based bank analyst Kenneth H. Thomas said. "The amended action is about as strong as they get."

On the deposit side, regulators told OptimumBank to reduce its reliance on “volatile and costly deposits” and not accept deposits from brokers in most cases. Just over 95 percent of the bank’s deposits pay interest and its cost of funds, which reflects rates paid to depositors, are higher than most South Florida banks. Regulators told the bank it must improve its net interest margin, as well as reduce discretionary expenses and cost overhead.

The bank also was barred from paying dividends or bonuses without regulatory approval.